Oil Dependence — Tom Friedman’s False Narrative

Twisting Facts to Support an Agenda

Thomas L. Friedman, a New York Times Op-Ed Columnist, frequently writes on the topic of energy and the environment. One persistent habit he has is to omit certain important facts from a story — facts so important that they would greatly undermine the point he is trying to make. His latest column provides a perfect example:

His premise is that Taiwan is a model for other countries to follow, because they have no natural resources, and yet have managed to be very successful by investing in their people:

Because rather than digging in the ground and mining whatever comes up, Taiwan has mined its 23 million people, their talent, energy and intelligence — men and women. I always tell my friends in Taiwan: “You’re the luckiest people in the world. How did you get so lucky? You have no oil, no iron ore, no forests, no diamonds, no gold, just a few small deposits of coal and natural gas — and because of that you developed the habits and culture of honing your people’s skills, which turns out to be the most valuable and only truly renewable resource in the world today.

Count me among those who strongly believe in educated citizens. Unfortunately, Friedman’s essay does not advance that cause, but rather misleads by omitting some very important facts. The thrust of his argument is that Taiwan did not need natural resources to become so successful. Unfortunately, what Friedman omits is that Taiwan IS heavily dependent upon natural resources, they just get them from other countries.

Taiwan’s 2010 oil consumption was just over 1 million barrels per day for a country of 23 million people. Thus, per capita consumption of oil in Taiwan is just over 16 barrels per person per year. That is more than 6 times mainland China’s 2.5 barrels per person per year, and 60% higher than the EU’s 10.1 barrels per person per year. On the other hand their consumption is lower than the 22.7 barrels per person the U.S. used in 2010. (For both the U.S. and Taiwan, some of the oil that is imported is then exported as finished products; however both countries are highly dependent upon foreign oil).

Per capita imports tell an even more interesting story. Taiwan imports 13.9 barrels of oil per person per year. The U.S. imports 12.2 barrels per person per year. So Taiwan is even more dependent upon foreign oil than is the U.S., yet Mr. Friedman’s essay gives readers exactly the opposite impression.

Take a look at the other successes Friedman cites:

That’s why the foreign countries with the most companies listed on the NASDAQ are Israel, China/Hong Kong, Taiwan, India, South Korea and Singapore — none of which can live off natural resources.

Now here are the things that he did not mention:

Israel’s per capita oil consumption is 11.3 barrels per person per year, higher than the EU’s

China’s oil consumption has nearly doubled in the last decade, and they are now the 2nd largest oil consumer in the world

Conclusion: Friedman’s Blueprint Doesn’t Exist

Despite the claims that these countries are highly successful without natural resources, the data say otherwise. They are simply living off of the natural resources of other countries.

But now — and you can see it from the comments following his article — he has led a great number of people to believe that these countries have the blueprint for success without oil. Why does that matter? Because then it greatly undervalues the importance of oil to modern society, which in turn leads to all sorts of false expectations and misguided legislation.

There is a legitimate point in his essay that investing in the education of a country’s citizens is important. But trying to extend the story as one of success despite a lack of natural resources — while overlooking the fact that the countries he cites are all high oil consumers — presents a false narrative.

One big issue. Using the very link to Oil – imports (bbl/day) the author uses, the USA does, indeed, import 3% more oil per capita then Taiwan. Give they have 23 million people and we have 311 million.

One, it isn’t a big issue. But two, I have no idea where you are getting your numbers. My links show Taiwan imports to be 876,000 bbl/day and U.S. imports to be 10.3 million bpd. That works out to be per capita consumption of 13.8 bbl/person/year for Taiwan and 12.2 for the U.S. Click on the actual link for the U.S. and you will see that the most recent data is exactly what I posted. You are probably looking at the 11.3 million number for the U.S., but that is dated. Click on the U.S. in that listing and you get the current number.

I have heard this thesis before. As the cases of Norway and Canada show, the random existence of a given resource under your soil does not in itself determine your country’s future success. Oil is not a natural drug that infects the mind of helpless leaders who would otherwise have done the right thing for their people.

I think a better correlation might be quality of government versus average education level. As I’m sure Benny will agree, much oil production comes from countries which have, shall we say, leadership issues.

Here’s a case where someone takes a multivariate problem, and focus on the one variable for which he has an agenda. He doesn’t investigate the role of other variables. And the public? Yet another reason to believe how awful the oil industry is!

Well, I just read his article and I don’t think your criticism is quite right. He only shows the inverse relationship between an economy based on natural resource extraction and education. You haven’t disproved his evidence. He doesn’t claim in the article that your country shouldn’t consume natural resources(although, Mr. Friedman is known to be freen), it’s just that natural resource extraction lends itself to government monopolies(have you been following Russia since the fall of communism?) and that has an adverse effect on the development of institutions that make for a growing, free economy. Would you argue that countries who’s economy depend on natural resource extraction for most of their wealth are better places to live than the countries he names as tops in education? It’s standard of living that he’s getting at.

He only shows the inverse relationship between an economy based on natural resource extraction and education.

Well, no, that would actually require a bit more work than he has done. He would also need to include countries such as Canada, Norway, and the UK which all derived major wealth from oil, yet still had no problems learning to build factories and such.

He doesn’t claim in the article that your country shouldn’t consume natural resources

He leaves the implication that countries don’t need them if they invest in their citizens. After all the title says “Hold the Oil.” And if you look at the comments following the article, that’s the impression he left with many readers.

Would you argue that countries who’s economy depend on natural resource extraction for most of their wealth are better places to live than the countries he names as tops in education?

Norway and Canada are not bad places to live. I can also point out numerous places without oil that have very low standards of living. It isn’t the oil that is the issue, which is what Friedman is arguing.

Robert, thank you for your reply. I’m sorry I don’t read the comments on the NY TImes as they get too many trolls over from the Fox New Channel. I don’t agree that Canada, Norway, and the UK are good counter examples of Mr. Friedman’s point. Even though Canada exports a lot of energy, net exports of energy only accounted for 2.9% of Canada’s GDP in 2009. Granted, they do export energy, also. The CIA Word Factbook lists Canada’s major exports commodity exports as: motor vehicles and parts, industrial machinery, aircraft, telecommunications equipment; chemicals, plastics, fertilizers; wood pulp, timber, crude petroleum, natural gas, electricity, aluminum, in that order. It estimates services will constitute 71% of GDP in 2011. In Norway’s case, as most economists know, is the classic case of the problem with natural resources being too big a piece of your economy as this strengthens your currency so much, it can make a countries other industries less competitive. Eventually, the energy will deplete. Norway, however, had institutions in place before they struck oil, so the industry didn’t develop there like Mr. Friedman fears it can. England has also had a diversified economy thru it’s history and benefited from trade relations with it’s colonies.

As for countries that don’t have natural resources and are poor, how much have they invested in education? I suspect these countries on your mind have not invested much; whereas Mr. Friedman is referring to a country that could. Now, how to get the money to invest in education opens up into development topics, that are beyond the scope here.

I think Friedman is spot on: develop your people, and the resources will take care of themselves.

RR, sounds like you are looking for a denial (of the importance of resources) that isn’t there. The numbers you list merely prove that countries with educated populations can afford to buy the resources they need.

And if oil prices were to stay high for the long haul, it is the countries with the educated populations that will figure out how to be more efficient, and would be most likely to find alternatives.

That is more than 6 times mainland China’s 2.5 barrels per person per year…

To which I’d ask: How many times is Taiwans GDP per capita higher than China’s? If it is more than 6, Taiwan is still more efficient than China.

Careful that you don’t hold up China’s poverty as a virtue that we need to copy…

RR, sounds like you are looking for a denial (of the importance of resources) that isn’t there.

You don’t have to look too hard. It’s right there in the title: “Hold the Oil.” What else could that possibly mean? Then there is zero acknowledgement in the article that they are dependent upon oil, and the commenters picked up on the theme: “They don’t need oil because they developed their people.”

Oh, I don’t read “Hold the oil” to mean we can do this without using any oil. His point, it seems, is that drilling does not create wealth the way education does. I think you’d agree with that.

The likelihood of developed (and educated) economies being denied access to oil would seem exceedingly remote, if for no other reason that no-one else would be able to outbid them, if oil became real scarce. And no-one else would be better placed to develop alternatives.

Maybe we just see the world fundamentally differently: you are expecting a crisis that I just don’t see coming…

BTW, I wouln’t pay too much attention to the comments section: that is usually a huge load of hot air, by people with little understanding. A load, but small group, I suspect…

Are you suggesting the NYT is losing readership, because readers are too intelligent for the paper? That would be jest.

The reason the paper are losing readership is not so straightforward IMHO. Reasons would include:

1. Competition from free news websites, including those of the same papers.

2. Too much focus on “what customers want”, a general problem all over the US. This leads editors to believe that the adventures of Britney Spears and Kim Kardashian is their only priority. In the long run, that dumbing down of the news costs them readers.

3. Political correctness trumping calling a spade a spade. This is what makes talk radio so popular: those guys always call a spade a $%^& shovel…

True, England has some totally awful papers. They also have some good ones, like The Guardian, The Independant and the BBC (not a newspaper, but great at reporting).

I have read through Mr. Friedman’s article and the message I get is that he is saying that those countries who are considered a success today, but were not blessed with an abundance of natural resources to exploit, are successful because they invested in the education of their population. He does fail to note that the other factor of their success was access to (and utilization of) the natural resources of others, leaving the impression that it is sufficient to have a highly educated/skilled population (“Optimist’ stated this succinctly “..and the resources will take care of themselves..”)

Absent access to those natural resources (imposed, for instance, via a military embargo, a breakdown in international shipping/trade, or diminishing availability of essential resources) – all of the examples Tom provided would have smaller economy and either a smaller population a reduced standard of living, or both.

That said – I’d prefer a storyline that promotes greater public education rather then military prowess as the avenue to success (and will strive to ignore the fact that the investment in an educated public can also substantially contribute to the development of more effective military weapons)

He could make the same argument about New York City. New York City doesn’t drill for oil and gas or do any mining either. And it is enormously wealthy. Of course the city would collapse in a matter of hours if oil and especially gas stopped flowing to it and all of the products that are consumed there that are produced with oil and gas suddenly stopped appearing. The city would never have been built in the first place without mining and extractive processes.

You forgot to mention the one thing that undermines the argument you’re making: Uniquely among countries, Taiwan’s petrochemicals industry makes up nearly 30% of the country’s GDP. So of course they have massive resource consumption, far more so on a per-capita basis than most other places, because they are consuming raw petroleum materials and exporting not just refined products but also plastics and other chemicals.

You forgot to mention the one thing that undermines the argument you’re making: Uniquely among countries, Taiwan’s petrochemicals industry makes up nearly 30% of the country’s GDP.

First, I did mention that. I said that the U.S. and Taiwan both export some of the finished products from oil. But second, if Friedman’s point is that Taiwan is succeeding without oil, and mine is that their economy is heavily dependent upon oil, how does your point undermine my argument? It would seem to me to be highly supportive of my argument that Taiwan’s success is very much linked to their oil consumption.

Lets’s get to the nub of Mr. Friedman’s promotion of Taiwan as a role model; the sometimes maligned national security doctrine of the past Cold War known as Mutually Assured Destruction (MAD) found a twin in the the expedient logic of Mutually Assured Dependence (MAD). Some might reasonably argue that such economically-based assumptions are equally dangerous, if not mad, indeed. Without revisiting here the various arguments in favor of a mutually assured dependence that has served as a de facto cornerstone of an international monetary order organized at Bretton Woods by the western powers seeking to smooth the way toward global economic integration and trade liberalization in the wake of WWII reconstruction, we are left with the leap of faith that rational economic interests consistently prevail in what should be fair and open competitions among nation-states and their commercial proxies.

Taiwan deserves to be widely admired for its exceptional progress of the past several decades. The country’s achievements are remarkable and this is clearly attributable to its national character and the critical importance placed on teh development of human capital and the attendant benefits accompanying educational advancement. Could any of this have been accomplished without the ready availability of fossil fuels? Well, that one hardly merits a response. Will the future prosperity of Taiwan continue to require access to affordable energy supplies? Certainly. Will these supplies come from indigenous sources anytime soon? Not likely. Does the Taiwanese government seek energyy independence as a safegaurd to their continued economic progress and security? No more so than Japan or any number of other nations that have taken up membership in a interdependent global marketplace that revolves around a major dose of expedience and psychological discomfort given the specter of collective demise as the small price of a theory of political-economy that hangs much like the sword above the head of Damocles.

Those who promote investments in human capital quite apart from similarly important investments in energy resource development are logically inviting a most untimely haircut! One hopes that Tom Friedman understands this logic even if his editors wink at such inconvenient truths along the way.

Wow, that’s a dirty word for international trade. International trade benefits everybody. The simple way to understand this is to imagine living on a farm, and being completely independent. It can be done. But it is very inconvenient, and it will cause your standard of living to go way down.

It is indeed disturbing to see Americans so suspicious of the world they helped to invent. Another of Friedman’s observations.

Dirty word? Dependence: 1. The state of being influenced by or dependent upon others; 2. reliance or trust. Guess dependence is in the eye of the beholder. Imagine living on a farm–not too hard since some of us grew up on one and where independence was something to be admired. Guess it really becomes great in theory but unfashionable in practice in an era of galloping globalism where Tom Friedman’s world is flat; post hoc, ergo propter hoc, we all just toe the line of the new international rules of the game.

Wow, we sure are a long way from the Spirit of ’76. Ah, but they do call all these nifty arrangements “progress.” Sort of makes me want to buy a few cows to process some methane while we wait on the big transition to (temporarily cheap) natural gas, fuel cells and EVs. Hope the folks over at Ben & Jerry’s have some back-up for the refrigeration.

Maybe we can get RR to send along his book via Pony Express after the Chinese sovereign wealth funds decide not to refinance their portfolio of Treasury bonds– in the disquieting event some of the old Maoists happen upon a more independent streak:)

The consumption number for Singapore includes all crude imports, but Singapore refines, well ExxonMobil etc.does, that oil for export as products, which is the key to their energy security strategy, similar to South Korea and now India. This is not to suggest that oil is not an important part of their economy, but the suggestion that Singaporeans use oil in the same way–and even more than–Americans by driving cars and heating homes with it as lavishly, even more profligately, as we do is extremely misleading.

…but the suggestion that Singaporeans use oil in the same way–and even more than–Americans by driving cars and heating homes with it as lavishly, even more profligately, as we do is extremely misleading.

That wasn’t the suggestion. The suggestion was merely the factual statement that they are heavy consumers of oil. Of course it’s because they refine, but that emphasizes the point that their economy is heavily dependent upon oil, thus they are not “holding the oil.” Regardless of how they use it, to hold up the largest per capita consumer of oil in the world as if they have somehow broken free of oil is what’s misleading, which is why I emphasized it.